R. Carrillo & Co. v. McAfee Bros. Furniture Co.

The McAfee Brothers Furniture Company had been engaged in the retail furniture business at 2111 Ashland avenue, Toledo, Ohio, for some time prior to October 2, 1931. On that date this action was commenced in the common pleas court, and Charles Rothert was appointed receiver of the company. The property coming into the hands of the receiver was appraised at approximately $4,000, and the indebtedness was found to be in excess of $10,000. The Rockford Furniture Company and other intervening creditors claim title to certain of the property of the approximate value of $2,150, upon the ground that they are the owners thereof, and that it was shipped to the defendant, The McAfee Brothers Furniture Company, on consignment.

Upon trial in the court below, judgment was rendered in favor of the receiver and against the intervening creditors. As the Rockford Furniture Company is the only one of the intervening creditors that perfected an appeal to this court, that company will be referred to as the intervening petitioner. The contract between the intervening petitioner and the defendant company reads as follows:

"This agreement, made this 7th day of March, 1929, between the Rockford Furniture Company of Rockford, Illinois, party of the first part, and McAfee Brothers Furniture Company of Toledo, Ohio, party of the second part.

"Witnesseth: That the party of the first part in consideration of the compensation and conditions hereafter named, agrees to forward to the party of the second part, on consignment, certain articles of furniture.

"That the party of the second part, in consideration of the said furniture being forwarded to him or them by the party of the first part, on consignment, agrees to accept, take delivery of, and sell the said furniture and to remit and pay to the party of the first part the sum or sums of money set forth on invoice rendered at the time of shipment, or such part or parts thereof as is represented by the value as so invoiced, of the furniture sold, within thirty (30) days after such sale or sales are made.

"That the party of the second part shall pay all expenses for the storage, cartage, transportation, handling, sale and distribution of the said furniture and all expenses incident thereto, except on return of merchandise requested by the party of the first part, or on account of defects, in which case said expense shall be paid by party of the first part.

"That the party of the second part shall insure the said furniture against both fire and theft for the protection of the party of the first part, and the party of the second part agrees that the failure to keep said insurance in full force and effect shall be deemed negligence on the part of the party of the second part and render him or them liable to the party of the first part for any loss occasioned by such failure to insure. Said policies, or the premium receipts therefor, shall be held by the party of the first part.

"That the party of the second part shall keep account books and records giving complete information covering all transactions in connection with the sale and distribution of the said furniture, and such books and records shall be open at all times to the inspection of any duly authorized representative of the party of the first part. All furniture shipped under the terms of this agreement shall be kept at the store of the party of the second part at 2111-13 Ashland Ave., Toledo, until sold and shall be subject to inspection by the party of the first part or its agents during business hours.

"That the party of the second part shall make to the party of the first part weekly written reports in detail covering all transactions in connection with the sale and distribution of said furniture and the quantity or quantities remaining in his or their custody as of the date of such report.

"It is further agreed that if default is made in any of the agreements or conditions herein contained, to be kept and performed by the party of the second part, then this agreement shall terminate and be ended at the option of the party of the first part, its agents or agent with or without notice; it is hereby agreed that the extension of any of said payments, or waiver of the breach of the said conditions, shall not in any way impair or forfeit the rights of the party of the first part hereunder; and it is further agreed that the party of the first part, its agents or agent, may, with or without notice and without process of law, take possession of the said furniture, or any part thereof that remains necessary in so doing, and the party of the second part, and for that purpose may enter any of the premises of the party of the second part to search for or obtain the said furniture, using such force as may be necessary in so doing, and the party of the second part hereby waives any trespass or any rights of action for damages which he might or could have against the party of the first part, or its agents, by reason of the party of the first part, or its agents, procuring or attempting to procure possession of said furniture after forfeiture as aforesaid.

"It is further agreed that the party of the second part, without default, keeping and performing all of the said agreements and conditions, shall at any time during the term of the agreement have the privilege of purchasing said furniture, or any part thereof, upon such terms as may be specifically agreed to by the parties hereto. But it is expressly understood that the property in said furniture and the title to same, remains in the party of the first part, subject to be divested only according to the terms of this agreement.

"It is further agreed that the party of the first part may put an end to and terminate this agreement and take possession of any furniture covered by this agreement and in the custody of the party of the second part as of the date of such notice, by ten (10) days notice in writing sent postpaid to the party of the second part. Any incompleted business arising from sales theretofore made by party of the second part shall be consummated on the same basis and terms as if this agreement were continuing. Party of the second part agrees to properly crate and ship any unsold goods without charge to any address which party of the first part may designate if this contract be terminated.

"In witness whereof, the said parties have hereunto set their hands on the day and year first above written.

"Rockford Furniture Company, "By G.H. Carlstrom "(Party of the first part). "McAfee Bros. Furniture, "By F.E. McAfee "(Party of the second part)."

A stipulation is on file by which it is agreed that the rights of other intervening creditors shall abide the outcome of this action.

The question presented is whether or not under this contract there was a conditional sale of the goods or merely a bailment. Counsel for the intervening petitioner concedes that, if the transaction involves a conditional sale, the intervening petitioner is a general creditor only, for the reason that the contract was not verified and filed with the county recorder in accordance with the provisions of Section 8568, General Code. This section has no application to a deposit of goods on bailment for sale, for then the relation of principal and agent arises between the owner of the goods and the one in possession for purpose of sale. As the contract recites that the goods are shipped on consignment, the parties will be referred to as consignor and consignee.

What is the proper construction of the contract? It will be observed that the McAfee Bros. Furniture Company did not become the purchaser of the property, and at no time had the right to buy it, but merely had the privilege of purchasing all or any part thereof upon such terms as might be specifically agreed to by the parties. The title thereto at all times remained in the consignor. It was the duty of the consignee to sell the goods and pay to the consignor the amount set forth in the invoice rendered at the time of shipment within a period of thirty days.

It has been held that, where a contract provides that the consignee may fix the selling price and retain the difference between the price for which the goods are sold and the price at which they were invoiced as his commission, and shall also pay storage, transportation, and other expenses, the contract does not thereby become one of sale. In re Thomas, (D.C.), 231 F., 513; In re Columbus Buggy Co., 74 C.C.A., 611, 143 F., 859; National Bank of Augusta v. Goodyear, 90 Ga. 711,16 S.E. 962.

This contract also contains a provision to the effect that the consignor shall have the right to require a return of all the unsold goods either upon default in the performance of the contract on the part of the consignee or upon the termination of the contract by notice; this provision indicates a sale on consignment and not one of conditional sale. Furst Bros. v.Commercial Bank of Augusta, 117 Ga. 472, 43 S.E. 728. The fact that the goods are accompanied by an invoice does not of itself make the transaction a sale. National Bank v. Goodyear, supra;Furst Bros. v. Commercial Bank, supra; Thompson Co. v. Barnum Co., 49 Iowa 392.

It is often difficult to determine whether a contract is one or the other of the two kinds under discussion. Under the contract in the case at bar, which is in terms one of consignment, consignee could not purchase the goods himself without a new agreement, could only sell them to others and account for a fixed price, and could not prevent the consignor from repossessing the goods unsold on tender of written notice. Moreover, there is here none of the indicia of a contract of conditional sale. Under the circumstances, it cannot be said that there was a sale to the consignee, or that the transaction came within the terms of Section 8568, General Code. The consignee merely held the unsold goods as bailee, and was required to surrender them to the bailor in accordance with the terms of the contract. Attention is called to the annotation in 63 A.L.R., 355.

The intervening petitioner is therefore entitled to possession of the goods belonging to it, as against the receiver.

Judgment and decree accordingly.

LLOYD and RICHARDS, JJ., concur.